Wishful Thinking Won’t Solve the US Debt Crisis
Correcting fiscal-policy mistakes is difficult in the best of times. To assume otherwise as US debt rises and the political system fractures is dangerously complacent.
Who thinks they’ll come up with a fiscal fix?
Photographer: Melina Mara-Pool/Getty Images North America
The budget plan taking shape in Congress is likely to add some $4 trillion to the national debt over the next 10 years. The ratio of public debt to gross domestic product is already close to 100%, about as high as at the end of World War II, and rising steadily. Even without new tax cuts now on the table, the debt-to-GDP ratio is on track to exceed 160% over the next few decades.
A lot of economists aren’t much concerned about this. In a new paper, Wendy Edelberg, Benjamin Harris and Louise Sheiner of the Brookings Institution join the ranks of the calmly complacent. Their argument is far from reassuring.